Journal of Rural Development
Farm Income Distribution Effects of the Public Interest Direct Payment
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AuthorHeo, Deungyong
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Publication Date2025.12.21
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Original
This study examines the impact of the 2020 public interest direct payment system reform on income inequality among farm households by using the Korean Farm Household Economic Survey micro-data (2018‒2022). A hypothetical scenario is created where both the old and new direct payment systems are implemented in the same year, and a simulation is used to directly compare their effects on farm household income distribution. To measure the effect of direct payments on farm household income inequality, the Gini coefficient is calculated, and the Lerman-Yitzhaki decomposition and Shapley value decomposition methods are applied. The results show that, overall, the public interest direct payment system has a greater effect on alleviating income inequality among farm households compared to the old system. This effect is partly due to the regressive design of the public interest direct payment system; however, it is found to be more strongly driven by the expansion of the payment amount under such a regressive framework. The decomposition analysis suggests that the public interest direct payment is distributed more equitably among farm households, contributes less to income inequality, and reduces inequality with fewer changes in income rankings compared to the old direct payment system.
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